Private Label Leading the Way

First Safeway, now Nash Finch. The idea of taking a private store brand and offering it to other retailers is catching on.

In a recent interview[3] with The Minneapolis Star-Tribune, Nash Finch CEO Alec Covington said he hopes to make the company’s new line of Nash Brothers Trading Co. organic products available to other supermarket chains.

The label rolled out with 54 products a few weeks ago, and the plan is to expand it to 420 items by 2011.

Of course, Safeway was the first U.S. company to exercise this strategy, selling[4] its “O” Organics and Eating Right private labels through a subsidiary created specifically for the purpose. The Better Living Brands Alliance has so far met with great success.

Covington, who before Nash Finch was CEO of Tree of Life[5], the Florida-based natural/organic distributor, envisions a similar plan. Currently Nash Finch gets more than half of its revenue from the wholesale side of the business, and striving for a bigger presence on store shelves will help boost that number.

Such moves seem to be a double-positive for retailers these days. First, there’s the benefit of offering a store brand, which allows supermarkets to keep a higher percentage of sales. Then there’s the natural/organic label on top of it. This allows retailers to keep an even larger margin to themselves, because even the price differential between conventional and organic store brands is noticeable.

A new study[6] out demonstrates just how enamored of private label we’ve become. According to Research and Markets, private label in the United States has grown by almost 60%, compared with around 23% for the U.S. retail food and drinks industry as a whole. “As a result, private label now accounts for over 19% of market value, up from less than 15% in 2003. In volume terms, private label has increased its share of the overall market to almost a quarter (24%), up from around 20% in 2003,” the report states.

As long as consumers view store brands as equal to — or better than — branded equivalents, one suspects there will be a more active market for retailers and wholesalers looking to make their store brands a signature brand worthy of a national rollout.